The Welfare State and Globalization: Market-Driven State or State Policy Choice?

Abstract

In light of rhetoric about globalization being an overpowering force that will render the welfare state extinct, this paper seeks to clarify what leading scholars on this matter have revealed through their empirical studies in developed countries. The findings determine that hypotheses about an imminent erosion of the state’s autonomy are rather narrow and that good economic performance is positively related to increased public spending. The paper then examines the conditions under which the welfare state and globalization have been successfully coupled, proposing a model which combines institutional capabilities of labor market organizations and political will within governments. The paper concludes that the welfare state does not necessarily have to be in tension with economic globalization. Under certain conditions, a generous welfare state can perform well economically. This indicates that states, as political entities, remain the ultimate authority to choose which economic policies to enact. This choice is more limited for the global south - particularly where democratic institutions are lacking.